Buy American Act – Home Depot Revisited

Beginning with President Roosevelt and the Great Depression, Congress has tried to balance price with promotion of American jobs and manufacturing. In 1933, Congress passed the Buy American Act. That law required certain purchases of American products and goods when the purchased was the government or federal funds were involved. Today, there are many other laws including laws specific to defense department spending and spending on transportation infrastructure.

In 2008, Home Depot was accused of violating the Buy American Act and a related law called the Trade Agreements Act. The lawsuit was brought by two whistleblowers under the federal False Claims Act. That law allows whistleblowers to receive a portion of money recovered by the government from wrongdoers.

The two whistleblowers, Luisa Jaro and Robert Scott, were both employed by a company called Actus Lend Lease LLC. Actus was awarded a contract to build military housing on the Hickam Air Force base near Pearl Harbor, Hawaii. Jaro and Scott claimed that Actus and Home Depot conspired to build the housing units with “cheap foreign materials.”

Actus’ contract required compliance with the Buy American Act unless a waiver was obtained in advance of any purchase. Waivers are only available in limited circumstances such as the nonavailability of a U.S. made product. No such waivers were obtained.

Instead, Actus prepared an Actus Lend Lease Buy American Compliance Guide. Jaro and Smith claim the guide was a ruse to make it appear that the company took its legal obligations under the law seriously. Instead, they claim that Actus and Home Depot were working together to source construction materials from China.

The ultimate contract was based on hard costs of $238 million. Actus submitted its bid based on Buy American compliant materials but was secretly working with Home Depot to supply cheap foreign materials. The price differential went into Actus’ pocket.

These arrangements hurt not just taxpayers but also legitimate contractors and vendor who bid the project in good faith and with American made materials. Allowing Actus and Home Depot to illegally substitute cheap goods hurts taxpayers, America’s manufacturing industry and legitimate suppliers and contractors.

Actus settled the allegations against it but Home Depot decided to fight. Although the Justice Department did not intervene in the case, it did weigh in when Home Depot demanded the case be dismissed. After the court ruled in favor of the whistleblowers and government, Home Depot settled for $2,250,000.

Neither Actus nor Home Depot admitted any wrongdoing.

The case against Actus was much clearer cut but Jaro and Smith argued that Home Depot knew it was supplying foreign made products for use in a government project.

The amount of the whistleblower award has not been disclosed. The case was settled in 2011. Generally whistleblowers receive between 25% and 30% when the government does not intervene.

—

Violations of the Buy American and Buy America laws hurt both taxpayers and American workers. Sometime use of foreign made foreign products can involve safety issues such as toxic drywall and inferior structural steel, both of which are often imported. For example, when a company swaps or forges compliance certificates for steel it becomes difficult to determine the chemical composition and strength.

Do you know about violations of the Buy American Act? Thinking about becoming a whistleblower? Call us. There is no obligation and all inquiries are always kept confidential. Our whistleblower clients have received in excess of $100 million. For more information, visit our Buy America / Buy American info page or contact the author of this post. Attorney Brian Mahany welcomes inquiries: *protected email* or (414) 704-6731 (direct).